Govt Goes Ahead With Petrol Subsidy After Telling IMF it Won’t

Despite earlier promises to the International Monetary Fund (IMF) that such measures would not be implemented, the government has moved a summary for the approval of a gasoline subsidy for motorcyclists and owners of small vehicles to the Economic Coordination Committee (ECC) of the federal cabinet for approval.

According to the Express Tribune, after Prime Minister Shehbaz Sharif approved the plan for immediate execution, the Petroleum Division has submitted the summary for approval by the Cabinet’s ECC.

Customers who are already struggling to pay a record-high price of Rs. 282 per liter for gasoline will now have to pay an additional Rs. 75 per liter to the government. People already suffering from 50-year high inflation of over 35 percent and all-time high food inflation of 46 percent are made to bear an additional burden by the scheme.

Relevantly, the owner of a 1000cc taxi under Rs. 1 million would be required to pay an additional subsidy of up to Rs. 75 per liter for 660cc automobiles that are more expensive in comparison. The possible budgetary effects and misuse of the scheme have also drawn the attention of the IMF.

Pakistan recently gave the lender assurances that it had no plans to put the subsidy system into effect, but the situation appears to be the opposite.

The targeted segment consists of 1.36 million cars with engines less than 800cc, 20 million motorcycles, and rikshaws, according to the Petroleum Division. When authorized, motorcycle riders will receive 21 liters of free fuel each month, and drivers of automobiles with engines under 800cc will receive 30 liters. These users make up 51% of all monthly consumption, a number that might increase when the program is put into place.

More information hints that the One-Time-Password (OTP) mechanism might be used to accomplish the scheme. The National Bank of Pakistan (NBP) account has been suggested as the location for the deposit by the government.

The price of gasoline will increase above the base price, as previously stated. Oil Marketing Companies (OMCs) will increase the price of gasoline, collect the difference from gas stations, and deposit the money in the NBP bank account designated for the Finance Division.

The price of gasoline is anticipated to increase in the first phase, reaching approximately Rs. 370 per liter, including Rs. 75 for relief. Petrol costs Rs. 75 per liter for non-beneficiaries, increasing the total assistance available to Rs. 125 for owners of cars and motorcycles. The Rs. 25 per liter will be utilized to pay for NBP and NADRA administrative expenses.

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